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Economic Sectors and Employment Sector Cluster media briefing

1 March 2012

In his State of the Nation Address last year, President Zuma announced 2011 as “the year of the job creation” through meaningful economic transformation and inclusive growth. As a structure designed to ensure policy coordination and alignment across the government on issues of economic development, employment and equity, the Economic Sectors and Employment Cluster is central to the implementation of this directive.

Thus our work focused on critical regulatory and policy reforms that support overall growth and meaningful economic transformation, and the unlocking of growth and employment potential in the key jobs drivers as identified in the New Growth Path.

Key interventions to encourage accelerated employment creation were also prioritised. These interventions centre on measures to support employment creation in the main economic sectors while making the economy as a whole more productive and employment friendly. We were, however, cognisant of the fact that South Africa, like other economies across the globe, was emerging from a devastating economic crisis that saw us shed almost a million jobs.

The year 2011 saw recovery from the sharp downturn caused by the global great recession of 2008/09. According to Statistics South Africa, employment rose by over 350 000 in the year to the third quarter of 2011, which means that we are well on track to meet our overall target of five million new jobs by 2020.

That said we recognise that unemployment and inequality remain unacceptably high. In addition, the uncertain recovery internationally, and in particular the on-going economic difficulties in Europe, require clear and strong counter-cyclical policies in South Africa.

The creation of decent work remains the principle intervention for addressing poverty and inequality. In addition, the New Growth Path proposed a number of complementary interventions to address structural challenges underpinning inequality.

These include:

ensuring more equitable access to education and skills development;

accelerating rural development;

supporting land reform designed to support a more productive and inclusive agricultural economy;

Optimising on the job creation potential of the green economy; and

upgrading financial services for smaller enterprises and the social economy.

We are happy to present to you this morning progress that has been made on some of the things we committed to implement in 2011.

Economic development and employment creation

Since most employment creation occurs outside of the State, accelerating it requires the consistent use of core State functions to create an environment that encourages private enterprise and other non-state organisations to expand jobs. These include ensuring that:

Regulations of all kinds achieve their aims as efficiently as possible;

Infrastructure is of adequate quality and affordability;

Strong efforts to ensure more equitable and quality education and to expand post-secondary education and training;

Targeted and sustainable subsidies to kick-start new activities that can support large-scale employment creation;

Local procurement by the state stimulate demand, especially in light of the instability in international markets; and

Targeted public support research and development that unlock opportunities in the private sector.

To this effect, the New Growth Path and the Industrial Policy Action Plan 2 (IPAP) provide a framework for undertaking these tasks. They require co-ordination across all departments, many of which are not primarily concerned with the economy, as well as state-owned enterprises, municipalities and provinces.

The broad foundations of the New Growth Path are:

support for diversification of the economy into more employment-friendly sectors;

strong efforts to reduce unnecessary regulatory and infrastructure obstacles to investment and growth;

programmes that support more equitable ownership and inclusive market systems as well as improved access to quality education and skills development;

stronger social dialogue; and

taking advantage of new opportunities offered by a focus on the green economy and high-technology and dynamic sectors.

Industrialisation

Industrialisation is central to long-term growth and development. A host of sectoral and cross-cutting initiatives are being implemented under IPAP2. IPAP 2011/12-2013/14 was introduced in February 2011 and is being systematically implemented. To support IPAP, the new Manufacturing Competitiveness Enhancement Programme (MCEP) is being introduced this year. The programme will provide R25 billion over the coming six years for a variety of programmes.

In addition, the Automotive Investment Scheme (AIS) has seen the approval of 92 projects (seven final car producers and 85 component manufactures). The projected investment resulting from these approvals is close to about R9 billion based on incentives of R2, 5 billion, creating over 7000 jobs directly and more indirectly.

Economic infrastructure and public investment

The Presidential Infrastructure Coordinating Commission has identified a bouquet of projects that will promote growth and development; ensure appropriate investments, taking into account both the cost and quality of infrastructure required by different sectors of the economy as well as by households; and ensure adequate capacity to drive priority projects, especially at municipal and provincial level.

Short-term employment schemes

The public employment schemes are central to improving incomes and providing opportunities and work experience for the jobless, especially young people. These schemes are being driven by an inter-ministerial committee led by the Deputy President. The committee is tasked with expanding the Community Work Programme (CWP) and the Expanded Public Works Programme (EPWP) to reach over two million people by 2014/15.

Stronger social dialogue

Open and constructive engagement is necessary to mobilise key economic stakeholders. In 2011, under the auspices of National Economic Development and Labour Council (NEDLAC), we signed four accords on education; skills development; local procurement; and the green economy. In the coming year, we expect even more work in this regard, focusing on further areas covered by the New Growth Path.

Industrial Financing

The Industrial Development Corporation (IDC) is implementing the decision to double its envelope of industrial financing. In this context, it has dedicated funds for priority jobs drivers in the New Growth Path, including the green economy and agro-processing.

SMME support

Financing for small, medium and micro enterprises (SMMEs) is being bolstered by the merger of the three small business funding agencies - Khula, the South African Micro Finance Apex Fund and the IDC’s small business funding, as proposed in the 2011 State of the Nation Address. Cabinet approved the merger at the end of October 2011 and it will be established in April 2012.

Incubators for SMMEs form an important component of measures to support new enterprises. The Department of Trade and Industry (DTI) is in the process of establishing a total of 450 incubators, through partnerships with the private sector. In addition, the Economic Development Department is working with the University of Johannesburg to establish a virtual incubator for social enterprises.

Local procurement

Procurement of locally produced goods, rather than imports, can provide a critical stimulus to the economy and is now being supported through a variety of measures. From December 2011, new regulations required local procurement of specified products by all state entities, including clothing, buses, rolling stock and canned foods.

In this context, Passenger Rail Agency of South African (PRASA) has committed to a minimum of 65% for its rolling stock. Eskom and Transnet are about to launch the second phase of their local-procurement plans, with targets for increasing the local content in their building programmes. In addition, an agreement on local procurement has also been reached with business, and ways to develop local suppliers more pro-actively are currently being explored.

The Competition Commission

The Competition Commission has maintained its strategic approach to ensuring competitive market prices, focusing on intermediate inputs and wage goods that can affect costs and efficiency across the economy. They have successfully taken steps to reduce the cost of fertilisers, construction services, bread and poultry, amongst others.

The Broad-Based Black Economic Empowerment Codes

The Broad-Based Black Economic Empowerment Codes will be aligned more closely with the New Growth Path, with stronger incentives for employment creation, enterprise development, collective ownership and broad-based employment equity and skills development. In addition, the Broad-Based Black Economic Empowerment Act is being amended to address fronting and generally strengthen implementation practices.

Unemployment insurance

In support of the efforts to stimulate economic growth, fund industrial development and create job opportunities, the Department of Labour, through the Unemployment Insurance Fund (UIF), earlier this year invested an additional R2 billion with the Industrial Development Corporation, bringing the total investment to R4 billion. This investment has created 24 590 new jobs and contributed to saving 18 552 jobs.

The UIF/IDC bond provides capital for funding start-up industries and growing existing industries. The conditions for accessing the funds stipulate that a qualifying company must contribute to creating employment opportunities. The total number of jobs saved and created through the UIF/IDC bond stands at 43 142.

Tourism

Tourism creates jobs by serving domestic, regional and foreign visitors, and earns substantial foreign exchange. SA Tourism implements an effective international tourism marketing strategy that has contributed to strong growth in the sector. In addition, domestic tourism promotion is being pursued more vigorously. Grading of establishments, which is important for long-term quality control and sustainability, will reach over 7000 accommodation establishments by the end of the 2012/13 financial year.

Mining

In the State of the Nation Address, the President highlighted critical infrastructure blockages that delay investment in the mining sector. These blockages include investment in rail, road and bulk water infrastructure that is necessary for unlocking the mineral potential of the Waterberg and Steelport regions.

Unlocking this potential is critical in addressing another long-standing infrastructure bottleneck, that of energy security. As the Coal Resources and Reserves Study led by the Council for Geoscience reveals, these regions host a great share of South Africa’s remaining coal endowment.

The government-led increase in the provision of infrastructure to support the exploitation of mineral wealth is not an invitation to increase raw mineral exports at the expense of beneficiation. On the contrary, we see the potential to both increase our minerals exports receipts and local beneficiation of South Africa’s minerals. The Beneficiation Strategy as approved identifies five priority value chains, namely iron ore and steel, energy commodities, autocatalytic converters and diesel particulates, titanium and jewellery.

We will continue with our efforts to ensure the safety and health of mine workers. As part of this effort, the Mine Health and Safety Summit was held in November last year towards ensuring the commitment of stakeholders to the shared goal of a safer and more dignified environment for workers in the sector.

The Integrated Resources Plan (IRP2)

The Integrated Resources Plan (IRP2) as approved by Cabinet in March 2011 reserves up to 42% of all new and additional capacity to be from renewable sources, and 9% of installed capacity by 2030.Progress thus far constitutes 1 415 MW of phase 1 of a total of 3 725 MW to be procured by 2016. Environmental approvals for renewable energy projects have been fast tracked.

The 28 preferred independent renewable power producers have been announced, 18 for solar photo voltaic projects, eight onshore wind projects and two concentrated solar power projects. All projects must be generating power by mid-2014. This plan makes a significant contribution to South Africa’s Transition to a lower carbon economy. The implementation of the recently approved National Climate Change Response policy will further contribute to the lower carbon transition.

African Economic Development

To advance the programme of integration and development in Africa, the Tripartite Free Trade Agreement (T-FTA) made up of the Southern African Development Community (SADC) the East African Community (EAC) and the Common Market of Eastern and Southern Africa (COMESA) was launched in South Africa last year.

This agreement combines market integration, infrastructure development and initiates a work programme to promote industrial development in Africa. The announcement by the President about the AU/NEPAD North – South road and rail corridor championed by South Africa on behalf of the African Union (AU), as well as other spatial development initiatives supported by South Africa will benefit this initiative.

Employment creation in rural areas

Positive impact has been made in creating jobs and work opportunities through the implementation of different initiatives in rural areas. While the vulnerable groups, particularly women, have been linked to income generating activities, it is the youth that has benefited the most in terms of skills development programmes and jobs created.

A total of 7 398 youth were enrolled in the National Rural Youth Service Corps (NARYSEC) programme in 2010. The enrolment number will gradually increase by recruiting a further 5 000 youth during this financial year (2011/12) and a further 10 000 during the 2012/13 financial year.

Another programme that made an impact on employment is the Expanded Public Works Programme (EPWP) that created 540 423 work opportunities and 137 525 permanent jobs. Of these, 66 355 were under the Community Works Programme. The agricultural sector, including the Comprehensive Agriculture Support Programme (CASP), contributed 7 092 jobs of which 1 105 were permanent. The use of local labour in housing and infrastructure development contributed significantly to job creation and skills development.

By the end of December 2011, the Environment and Culture Sector of the EPWP had created a cumulative 307 731 work opportunities and 74 114 Full-Time Equivalent (FTE) jobs since 2009 across the country.

Initiatives to improve employment opportunities and economic livelihoods include the implementation of the aquaculture programme and the Inland Fisheries programme that will be launched in 2012. The DTI is expanding efforts to support agro-processing in rural areas, e.g. local maize milling.

The Department of Agriculture, Forestry and Fisheries (DAFF) is introducing a complementary agro-processing strategy. The Department of Science and Technology (DST) continues to support a range of demonstration agronomy and aquaculture projects that utilise new knowledge or technologies in supporting the development of sustainable livelihoods.

Assistance is being provided to small and micro enterprises and communities that require support for a simplified Environment Impact Analysis (EIA) process as part of IPAP2.

Skills development

In order to expand the knowledge and innovation capacity of the economy, government will be establishing two new universities, in Mpumalanga and Northern Cape, with the first phase commencing within the 2012/13 financial year.

The technical ground work for establishing the new universities will be completed by July 2012, including the identification of sites with campus and academic architectural plans. University educational infrastructure expansion and upgrading will also take place in order to improve teaching, research, accommodation and support services.

The Department of Higher Education and Training (DHET) is working with the Deans of engineering, animal and human health, natural and physical science and teacher education faculties to increase the enrolment, success and throughput of identified higher level scarce skills. Substantial funds have been allocated to deal with resource constraints through an infrastructure and efficiency grant. An amount of R1, 3 billion for the 2012/13 to 2012/14 financial years has been set aside for these study fields across all institutions.

The production of honours, masters and doctoral graduates need to support innovation and knowledge production in our economy. In 2011, close to 9 000 Further Education and Training (FET) and Universities of Technology graduates were placed in workplaces for experiential training. In addition, 4200 students were placed in workplaces whilst studying. The recently signed National Skills Accord includes commitments by business to increase the provision of such workplace experience opportunities.

A key challenge has been finding workplace experience opportunities for learner artisans to enable them to gain the experiential learning required to obtain a trade certificate. Over 17 000 unemployed learners and almost 12 000 workers have entered learner ships. In addition, 16 500 new learners have entered the artisan training system (indentured artisans), with 11 780 learners already passing and obtaining their trade certificates for the period April 2011 to January 2012.

Thirty FET Colleges participated in the training of the National Rural Youth Service Corps (NARYSEC) youth. In addition, a training programme in Community House Building (NQF 2) and Civil and Construction (NQF 3) has been initiated in partnership with the Development Bank (DBSA) and the Construction Education and Training Authority (CETA).

A total of 1160 NARYSEC participants have been enrolled in programmes like Records Management, Disaster Management and Farm Rangers, etc. To date 1 473 rural beneficiaries have been trained in manufacturing arts and craft products in four provinces (Limpopo (LP), Mpumalanga (MP), and KwaZulu-Natal (KZN) & Eastern Cape (EC)).

Research and development skills for a diversified economy

A Research Development Grant of R176 million and a Teaching Development Grant of R499 million has been earmarked in 2012/13 to enable the development of young lecturers towards becoming world class academics thus improving the success rate.

The DST has already announced that a total of 60 new Research Chairs will be awarded to various institutions of higher learning across South Africa, during the 2011/12 and 2013/14 Medium Term Expenditure Framework. This increases the number of Research Chairs in South Africa to 152.

The South African Research Chairs (SARChI) is a flagship initiative of Government designed to attract and retain excellence in research and innovation in the South African science system. The main goal is to strengthen the country’s universities to produce high quality postgraduate students, research and innovation outputs. Since SARCHI’s inception in 2005, Government has invested over R1.1 billion in the programme which is managed by the National Research Foundation (NRF).

Agrarian transformation

In order to revitalise and resuscitate land reform farms in distress and defunct irrigation schemes in the former homelands, the Department of Rural Development and Land Reform introduced the Recapitalisation and Development Programme. As at end September 2011, 595 farms under the Recapitalisation and Development Programme (RADP) were at various stages of development. Good progress recorded under Recapitalisation includes sugar cane in KwaZulu-Natal, red meat in Free State, North West and Northern Cape, poultry in North West, Gauteng and Mpumalanga and citrus in Eastern Cape, Limpopo and Western Cape.

A cumulative figure of 823 300 hectares were acquired and redistributed since 2009. Seven thousand of these hectares have been allocated to provide the core estate for the Cradock Bio-ethanol project in the Eastern Cape that will be implemented in partnership with the DTI, Economic Development Department (EDD), Department of Rural Development and Land Reform (DRDLR), Department of Agriculture, Forestry and Fisheries (DAFF), the Department of Energy and the Provincial Department of Agriculture. A total of 1,14 million hectares of State land has been surveyed (EC, MP, LP).

Smallholder support programmes are being reviewed and a smallholder plan developed in line with NGP targets. These plans are supported by a diverse array of agro-processing programmes under IPAP, including support for the soya bean processing, canning, bio fuels, furniture, and food processing industries, as well as small-scale maize milling in rural areas.

Policy-wise, notable developments include the launching of the Zero Hunger Programme and the Aquaculture Programme. Zero Hunger creates opportunities for the smallholder sector to grow by opening up institutional markets for their benefit, e.g. via the School Nutrition Programme, hospitals and clinics.

As part of the of the implementation of the National Climate Change Response Policy, long term adaptation scenarios will be developed to determine which sectors may be climate sensitive and propose options for response.

It is government’s view that the Willing Buyer-Willing Seller (WBWS) has frustrated efforts to fast-track land reform, distorted the market, made land price negotiations excruciatingly prolonged and increasingly making land reform financially untenable for the State. For example, R80 billion will be required to meet government land reform targets. Additional challenges that have undermined successful implementation include beneficiary selection as well as fragmented beneficiary support, land administration and governance [especially in communal areas], the problematic restitution model and its support systems.

The consultation process on the Green Paper on Land Reform has been completed. The department, in partnership with the key stakeholders, is analysing the public and written comments. It is expected that the draft policy will be presented by the end of March.

The year 2013 marks the centenary of the 1913 Land Act and the success of the Green Paper must be measured on the extent to which it mitigates and attempts to reverse the negative impact of this Act.

waterAccess to water for economic development and efficiency in water use

Significant progress has been made in ensuring efficiency in water use in the agriculture sector and ensuring access to water for socioeconomic development including targets set for Impala - one of the 14 big irrigation schemes. In addition, eight irrigation schemes are being revitalised across the country.

Farmers have benefitted through the Department of Water Affairs Resource Poor Farmer (RPF) Programme. This programme ensures access to functional water infrastructure for irrigation through rehabilitation and upgrading of existing infrastructure, operation and maintenance subsidies, rainwater tanks for food production, and bulk pipelines/infrastructure. In addition, rainwater harvesting tanks were distributed for food production and boreholes were drilled.

Access to water and water use licenses is crucial in the implementation of the land reform projects. Water Use Licences Authorisation were processed and finalised, reducing the water use authorisation backlog from more than 4 000 applications to 679. Of these, 1 658 contribute to rural development including afforestation and agricultural development. In order to ensure that land restitution beneficiaries retain water rights after settlement, discussions commenced between the Departments of Water Affairs and Rural Development and Land Reform towards reviewing the National Water Act to ensure alignment with land reform legislation.

Nine (9) regional bulk infrastructure projects were completed and 47municipalities were supported in implementing water conservation and demand management intervention measures to ensure water savings. As a result of the implementation of the Accelerated Community Infrastructure Programme, a total of 62,945,297 cubic meters of water was saved against the planned three million cubic meters.

The Blue Drop Certification programme was implemented in 162 municipalities in order to ensure the quality of water and the management of supply systems. A total of 66 water supply systems have been awarded the blue drop certificate, an increase of 74% on those awarded in 2010.

Eight hundred and ten (810) municipal waste water treatment and 914 water treatment facilities were assessed during the 2010/2011 financial year, in order to ensure that they meet the required standards. Waste licenses were issued and a comprehensive General Waste Minimisation Plan has also been approved contributing to the elimination of unlicensed sites in rural areas. The Green Drop assessment programme that measures the performance of waste-water treatment works was also implemented.

Conclusion

We have learnt some lessons particularly during the implementation of the outcomes that contribute to the work of this Cluster. Currently, we are reviewing these outcomes in order to ensure that interventions make high impact on inequality, poverty and unemployment.

We will intensify the focus on the job drivers as identified in the New Growth Path and on the implementation of the twelve action plans for immediate action by government that were adopted during the July 2011 Cabinet Lekgotla. These priorities reflect our assessment of where concrete, high-level interventions are needed to achieve governments’ aims.

The decisive intervention in this regard is the infrastructure programme developed by the Presidential Infrastructure Coordinating Commission and elaborated on in the State of the Nation Address and the recent Budget. While the infrastructure programmes falls outside of the responsibilities of the Economic Sectors and Employment Cluster, they will have a major impact on all of our programmes.

The budget tabled by Minister Gordhan last week indicates a strong commitment to government’s priorities that we have outlined above and continues to support job creation with particular focus on the unemployed youth.